In this role, the homemaker’s ability to manage two types of liquidity challenges, depending on the situation is highlighted. The tactical one and the strategic one. In the tactical situation, the ability to manage the month-end low liquidity by having kept reserve cash from the previous month’s surpluses, side pocketing, and deep valets needs special mentioning. In strategic situations, the ability to thus dig for hidden side pockets to tide over immediate high demand for funds by dipping to savings / local chit-fund activity and access to peer networks for deficit funding is extremely crucial. This role is under-appreciated and such techniques though widely known are hardly used by individuals in the households who are in charge of finances. We would go to the extent of saying many frontline money managers seldom use these basic practices and thus end up becoming sitting ducks. So, pat the homemaker for this crucial but underappreciated role.
Role of the Risk Manager
This is the supplementary role of the liquidity manager for the family. In fact, the role of being a risk manager is of greater value than being a liquidity manager, since being a risk manager averts major catastrophes that might befall a family. During such critical times, the ability to tide over the financial crises becomes foremost. In this role of the risk manager, the homemaker – by methods of side pocketing, hidden box savings, and above all, diversifying the savings and investment pattern can significantly control risk. A case in point here might be the penchant for buying physical gold (ornaments and/or coins etc), silver, etc. on a recurring basis (festivals/functions) which has been accumulated over a long period adding to significant reserve. This helps to tide over a financial crisis. This apart, the homemaker’s ability to stick to basics on managing personal finances are fundamental part of risk management. On this count too, in general, homemakers score higher marks on managing financial risk for a family.
Role of the Planning and Budgeting Department
This role comes as naturally to homemakers as fish take to water. Be it managing finances on a day to day basis, or for functions and special occasions. Planning and managing the budget however tight things might become is one aspect that seasoned finance manages need to learn. How do home makers, plan, anticipate events, the expenses and prepare for the occasions is something that needs to be inculcated by all. However, small or miniscule the cash flow or cash at hand might be, the home maker would fit the expense to suit the budget at hand. Tactics such as bargain hunting, discounting skimming, substituting and many other methods come quite naturally to them. Individual can learn a lot from them in terms of how budget and expense management should be done.
Role of the Financial Planner
This role therefore is a logical end to all the things that the home maker does on a routine basis. The ability to think strategic when it comes to financial planning are worthy of note. For instance, planning for retirement and keeping dry powder for a rainy day is something could come by instinct we believe. Though home makers might not be consciously planning the goal planning activity but at a sub-conscious level there is always keeping the retirement planning and kitty building or coaxing to do the same. So, don’t ignore that sane advice. Second, the shorter yet important goals like keeping aside money or accumulating the same for her children’s education even if it means doing spending cuts on other expenses are done with purpose.
So, look around you and you will find a home maker who has done all the above and more. It is time to learn the nuances of how and why things are managed and there are over a dozen things to keep in mind while you do your own financial planning and achieve your financial goals. Just remember the two rules. Do the basics just as the home maker does and concentrate on the various roles she does to find out how it is clicking.
Talk to us